pumped about biofuels

Some people say the U.S. can free itself from foreign oil dependence if it buys from the Midwest rather than the Middle East. Will the industry allow that to happen?

Back in February, a gasoline distributor told Karen Riley, vice president of operations for nine-store Jiffy Mini-Marts Inc. (Terre Haute, IN), about an alternative fuel called E-85. The mix of 85% ethanol and 15% gasoline, he said, was produced in the United States and it could be used in some cars that were already on the road.

“My dad (the chain’s founder, Jim Fash) was against it,” Riley says. “I wasreally interested in it. We went around and talked to the car dealerships. Dad’sargument was, ‘If they aren’t going to sell the cars for the fuel, you aren’tgoing to be able to sell the fuel for the cars.’ So we did some research andfound that there were already 800 Flexible Fuel Vehicles (FFVs) in Terre Haute,which means they can run on ethanol or straight gasoline.” So Riley and Fashwent back out to the dealerships and told them about FFVs.

“They didn’t realize what they had on the lots,” Riley says. “But they were interested in the idea of promoting a car that can run on alternative fuels that can drive us away from foreign oil and start the process of independence.”

Riley contacted local television stations and started doing interviews on newscasts to educate the public about E-85 and the fact that it was going to be available and that it was going to be as much as 40¢ cheaper than regular unleaded. That, however, was prior to the hurricanes; now, it’s just 15¢ to 18¢ cheaper.

“Then we figured out what we had to do to put it in the ground and we started selling it on May 9,” she says. “You have to have either ‘double wall fiberglass’ or ‘steel with fiberglass coating’ tanks in the ground. We had two stores with ‘steel tanks with fiberglass coating,’ so we sell it at those two stores.”

When E-85 replaced premium gasoline at the pump, E-85 sales quadrupled. The alternative fuel brings in a 20¢ margin— and the stores are pumping roughly 10 times the number of premium gallons they had been selling each month.

“I’ve had [Sen. Richard G. Lugar, R-IN] and the Lieutenant Governor [at one of the stores],” says Riley. “We were the first retail unit in Indiana to sell it. The secondstore didn’t have as big of an initial push as the first one.”

Riley says E-85 is the most viable of all alternative fuels because the infrastructure is already in place.

“When you’re looking at other alt fuels, there’s hydrogen and electric, but those take more expensive vehicles and whole different types of fueling stations,” she says. “Ethanol can be pumped out of the same pumps you use now. Additionally, the cars that run on ethanol cost the same as regular vehicles. There’s no extra cost to the consumer.”

With ethanol, consumers also get premium fuel—E-85 has a 105 octane—at unleaded prices.

“Plus, it supports the farmers because it’s made from corn that’s grown all around us,” Riley says. “There’s nothing negative about it. It can be made from any sugar product, but the biggest thing they use to make it is corn.”

An uphill climb Part of E-85’s uphill climb is the fact that the existing infrastructure cannotproduce enough of it. Currently, producers can manufacture only 2 billion gallonsof ethanol per year. Considering the fact that Americans guzzle more than 146billion gallons of gasoline each year, it’s easy to see why E-85 hasn’t been“ mainstreamed” just yet.

“They’re building more ethanol plants,” says Hugh Canady, owner of two Huey’s Marts in Las Vegas. “I think it’s the thing of the future. I’d like to get rid of foreign oil altogether. We wouldn’t have to worry about the Middle East anymore if we didn’t have to worry about their oil.”

Canady is putting his money where his mouth is; he’s selling E-85 at his two stores and has signed contracts to distribute it beginning in January.

“It’s something I thought the consumer wanted and needed, so we started sellingit six weeks ago and it’s turned out real well,” Canady says. “We had to putnickelplated nozzles on the pumps and change the filtration system. And, ofcourse, we had to change the signage. All told, the investment to make the switchwas about $3,000.”

“We’re doing about 160,000 gallons per month compared to about 60,000 per month on premium,” Canady says. “And we’re making about the same amount of money.”

Canady says it’s tough to predict whether E-85 will become a mainstream source of fuel in the future, even though President Bush made an executive order saying all government vehicles should run on E-85 when it’s available. But he’s excited to hear that General Motors has said 80% of its new vehicles will be FFVs.

“Right now, there are about 16,000 to 17,000 cars in Las Vegas that can use it,” Canady says. “GM is going to start sending out letters to people telling them they have a Flexible Fuel Vehicle. If everyone gets behind this—the car manufacturers, the government, the consumers—we can pretty much eliminate 85% of foreign oil.”

However, Canady’s hope is tempered by the knowledge that major oil companies wield great power in the U.S.

“Politicians don’t want to get involved in that because the oil companies are so powerful,” he says. “[Many] independent dealers have chosen to use E-10 (10% ethanol) all year long to cut emissions. The major oil companies haven’t done it all year long because they don’t want to lose that extra 10% of sales at their stations.”

If that’s the case, it’s no surprise that E-85 would be unpopular in the boardrooms of most major oil companies.

“A big oil company doesn’t want to be selling only 15% of their own product,” Canady says. “The big oil companies fight this all the time, trying to keep people off the E-85. Customers want it. This is the United States and we want to keep everything here. Most of this [ethanol] is made by American farmers, and it’s helped them out greatly. We don’t need to be supporting the Saudi Arabian Royal Family.”

The future? E-85 is just one of many alternative fuels offered at what is probably the WestCoast’s most futuristic filling station, Pearson Ford Fuels (San Diego, CA).Pearson Ford Fuels represents just a small part of a $15 million, 92,000 sq.ft. Regional Transportation Center (RTC) that sells and services vehicles poweredby alternative fuels.

The RTC also includes an education center, where children learn about energy and clean air, among other environmental issues. Last year, more than 10,000 students used the program, which is taught by San Diego Environmental Foundation staffers. The children’s experience is made complete by the fact that a natural gas-powered school bus transports them to and from the education center.

At the fuel pumps, Pearson sells liquefied propane gas, biodiesel (made fromfrench fry grease), compressed natural gas and ultra low-sulfur diesel; it’salso the largest electrical charging station in San Diego, according to ownerMik
e Lewis. Traditional gas represents 91% of Pearson’s sales, but Lewis thinksmany of the alternative fuels have a viable future.

“You can find a group of people who advocate any of these fuels,” Lewis says. “Each one of these fuels has advantages and disadvantages. Up until now, the one that has had the most advantages and the least disadvantages is gasoline. It’s still cheap—it’s cheaper than water—and it has been plentiful. And you can get a lot of energy out of it.”

Gasoline’s “dark side,” however, is becoming more apparent: pollution, discussion of global warming and the increasing cost of raw material—crude oil.

“The U.S.’s increased dependence on foreign sources for this fuel is a negative,” he says. “Most importantly, there is the inescapable fact that we will ultimately run out of it. There’s not an intelligent person on Earth that says we won’t run out. The only argument is when.”

Lewis thinks that day could come sooner-than many people think, especially with the increased consumption from emerging world powers like China and India. Until then, Lewis will continue selling multiple alternative fuels and take a “wait and see” approach.

“We have years to work it out,” he says. “We have sub-lessees for two of the alt fuels: propane and natural gas.”

Lewis says there’s a lot of grant money out there for a retailer willing “toput up with brain damage from years of bureaucracy.” The infrastructure at Pearsonhas built-in flexibility, so that if and when one alternative fuel becomes amainstream fuel, Pearson will be able to accommodate customer needs.

“In 10 years, I see hybrid cars being viewed as just ‘cars,’” he says. “[The technology] will be accepted and expected. There’s so much hope in hydrogen, but in reality it’s decades away. Frankly, the promise of hydrogen has done more to slow the growth of today’s alternative fuels. But it’s very easy for politicians to promise hydrogen.”

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